If you are registered with the Department of Revenue, you must notify us with any business ownership changes or closure. Failure to notify Revenue of business changes or closure could result in assessment of your business for delinquent taxes, penalty, and interest after your business has ceased operations.
Ownership changes or closure may include:
- selling or closing the business,
- adding or changing partners,
- transferring or changing the ownership of the business,
- changing corporate structure requiring a new charter or certificate of authority, and
- changing the business location.
Note that if the business is sold to another entity, purchase money should be withheld to cover any taxes, interest, and penalties that the business may owe. This is necessary until the former business owner can show proof from the Department of Revenue that all taxes have been paid and no interest or penalties are due. Under state law, the purchaser of the business can be liable for the unpaid taxes, penalties, and interest charges of the previous owner or operator. See the Department's business tax manual's section about business closure for more specific information.
What You Need to Do to Close Your Business
- If a taxpayer has been issued a license or permit, these must be surrendered and will be revoked by the Department of Revenue. If a taxpayer has posted a bond of any type against your tax account, the bond must remain posted until all outstanding liabilities are settled.
- A taxpayer that has a resale certificate and is closing its business must notify its suppliers in writing that its certificate is no longer valid.
- All closures require that businesses file final tax returns and remit taxes for which they are registered.
Most account changes and closures can be handled through TNTAP, or by calling us at (615) 253-0600.
Please note that the list of requirements below for each tax is not all inclusive. The tax manuals on our website provide more specific guidance. Please also note other state agencies, such as Secretary of State's office or the Division of Property Assessments, may have their own requirements for what to do when you close your business.
In addition, there are some specific actions that must be taken for certain taxes. Click on the links below for more information.
- Businesses holding standard business tax licenses must file and pay business taxes due to the Tennessee Department of Revenue within 15 days after the business ceases operation or is sold to another entity.
- Businesses holding minimal activity licenses should contact the county clerk and city recorder’s office to advise them that the business is no longer operational.
- If the business is sold to another entity, purchase money should be withheld to cover any taxes, interest, and penalties that the business may owe. This is necessary until the former business owner can show proof from the Department of Revenue that all taxes have been paid and no interest or penalties are due. Under state law, the purchaser of the business can be liable for the unpaid taxes, penalties, and interest charges of the previous owner or operator.
- If a taxpayer sells a business or closes a business, the taxpayer must file a final sales and use tax return and pay all tax due within 15 days after the date the business was sold or closed.
- If changes in business ownership occur, taxpayers should answer the questions on the back of the business's certificate of registration and mail the certificate to the Department of Revenue. The new owners, or officers, if applicable, must then apply for a new certificate of registration.
- If a taxpayer sells a business to a purchaser, the purchaser must apply for a certificate of registration in the purchaser's name. Any taxpayer allowing a new business owner to purchase property or services tax-exempt using that taxpayer's registration and certificate of resale is not only guilty of a misdemeanor, but also could be held liable for the tax due on such property or services.
- A business must obtain a certificate of tax clearance from the Department of Revenue before it can terminate a charter, articles or organization, certificate of limited partnership, certificate of authority, or another similar document with the Secretary of State.
- To obtain a certificate of tax clearance, a business must file all returns to date and make all required payments. This includes filing a final franchise & excise tax return through the date of liquidation or the date the taxpayer ceased operations in Tennessee. Similarly, all tax, penalty, and interest owed must be paid.
- Please note that franchise tax is computed differently based on how a business begins activities that result in a business liquidating:
- If a business initiates and completes the liquidation in a single day, the final franchise tax is determined by using the balance sheet values immediately preceding liquidation.
- If the liquidation occurs over more than one day, the franchise base will be the greater of the "average monthly values" of net worth or tangible property. The liquidation may include multiple returns.
- If a return is for a short period, the tax may be prorated, and rents should be annualized. Worksheets are available on our website to assist taxpayers in computing average monthly values, annualizing of rents, and prorating tax for short period returns.
- When all filing and payment requirements are met, the Department of Revenue will issue the tax clearance certificate for termination or withdrawal. The certificate will be mailed to the taxpayer's listed mailing address.
- To complete the remainder of the termination or withdrawal process with the state, taxpayers should contact the Tennessee Secretary of State's Office for their requirements.
- Any person that sells, transfers, or terminates ownership in a business that sells alcoholic beverages for consumption on its premises must provide notice of the sale, transfer, or termination to the Department of Revenue within 15 days of the effective date of the sale, transfer, or termination.
- The notice to the Department should be in writing as part of the final alcoholic beverage return and final sales tax return of the business.
- The business's alcoholic beverage license must also be surrendered to the Alcoholic Beverage Commission.
- Determine what you will do with your remaining liquor by either:
- selling it back to your wholesalers;
- keeping it - you will need to file for and pay use tax on any liquor kept; or
- destroying it - if you choose this option, a Department of Revenue employee must be present - you will owe no tax on any liquor properly destroyed.
- You must have the Department of Revenue come out to do an ending inventory.
- You need to get a tax clearance letter from the Department of Revenue.
- If a person selling or transferring a business allows the new owner of the business to pay tax, make wholesale purchases or conduct any business using the seller's alcoholic beverage license or tax registration, then the seller and the new owner will be jointly liable for any unpaid taxes accrued during the period of illegal operation.